By Alex Richardson
Nov 1 The fallout from the collapse of MF Global
Holdings Ltd rippled through global exchanges on Tuesday,
as operators moved to suspend the U.S. futures broker or limit
trades of its customers.
MF Global filed for bankruptcy protection on Monday
following bad bets on euro zone debt.
London clearing house LCH.Clearnet declared it a defaulter.
MF Global became the most high-profile victim so far of the
euro zone debt crisis, and revived memories of the collapse of
Lehman Brothers in 2008 that triggered turmoil in global
But market participants said because MF Global, although
highly leveraged, was far smaller -- its balance sheet, at $41
billion, was less than a 10th the size of Lehman's -- the wider
impact of its fall would be contained.
"While this is no Lehman Brothers, people will get more
cautious because they're afraid there could be another MF
Global," said Ang Kok Heng, who helps manage about $390 million
at Phillip Capital Management in Kuala Lumpur.
"When there's a run on a broker, it may be easier for it to
collapse compared with a bank. Banks get central banks
guaranteeing their deposits, while brokers don't get that kind
In Australia, trading in grain futures and options was
suspended by bourse operator ASX Ltd on Tuesday,
prompting concerns about the integrity of the country's
agricultural futures market.
"We're sitting out here with risk that we can't cover," said
Jonathan Barratt, head of Sydney-based Commodity Broking
The London Metal Exchange said in a statement on Tuesday it
had suspended MF Global from trading with immediate effect,
following a similar move by the CME Group , which
operates the Chicago Mercantile Exchange, Chicago Board of Trade
and New York Mercantile Exchange.
On Monday, CBOE Holdings Inc said it was
restricting trading by customers of MF Global to closing out
their positions on its platforms, the Chicago Board Options
Exchange, the C2 Options Exchange and the CBOE Futures Exchange.
Trading activity in gold, crude oil and grain futures slowed
to a crawl as the bankruptcy forced a chaotic scramble to
untangle trading positions. MF Global brokers were barred from
trading floors, according to Chicago traders.
Commodities such as natural gas and crude, where MF Global
had a strong presence, have been hit harder than others.
One Sydney-based LME trader said MF Global's failure could
encourage more market players to use clearing houses because
they offered greater protection than over-the-counter (OTC)
"If there are customers who are in an OTC arrangement with
MF Global, and these are not cleared by a clearing house, they
may be exposed," said the trader. "But we don't know who these
The New York Federal Reserve terminated MF Global as one of
its primary dealers and IntercontinentalExchange Inc ,
which operates futures exchanges in Europe and North America,
Singapore Exchange Ltd and Singapore's central bank
halted the broker's operations except for liquidations.